Know the numbers you need to see regularly to measure your financial health.

Knowing which financial reports to review — and how often — is critical to running an effective jewelry store.

Financial profit and loss (P&L) reports are useful for tracking expenses, but they can be limiting for a number of reasons. First, they tend to be historical, often by quite some time. There is little you can do at the end of the year if you discover your wage bill has blown out. The other limitation is the depth of information they provide. Sales and margins, the most important drivers of the business, are invariably reported as one line item with no breakdown as to the individual contribution from different products or categories.

That’s why a good inventory management system is essential for any progressive jeweler. The information contained in the reports provides breakdowns of sales revenue, cost of sales, average retail value, number of items sold, stock-turn and margins on an item by item, department by department or category by category basis. Your system will also give you the opportunity to review these results on a daily, weekly, monthly or yearly basis providing you with the chance to rectify discrepancies as they happen and before a pattern of poor numbers emerge.

Which reports are the most critical? So as not to be overcome with paperwork, I suggest concentrating on these:

1. Daily sales reports. Regardless of your system, this report will be available. It should provide you with a list of what sold any given day, who sold it, how much profit was made on the item, whether it is still in stock or needs to be reordered. It also provides you with totals for the day of sales, discount given, average retail value and markups achieved. Consider this report to be like a letter from your customers telling you what they like … and what they don’t like.

2. Category reports on a monthly and yearly basis. This report provides you with a summary of sales for each category for the month or year (depending on which you select), showing total sales, the percentage each category contributes to your overall business, average retail value, mark-up achieved, inventory on hand and stock-turn. This report is essential for determining which areas you need to concentrate on.

3. Vendor reports on a monthly and yearly basis. A similar report to the category report but by vendor rather than category. Which vendors contribute the most to your sales and gross profit? What percentage of sales comes from your top vendors? Whose product gives you the best average retail value and the best margin? Whose products have you too much/too little stock of?

4. Stock by age. This report shows categories where you have the most fast-selling inventory, the most new (but as yet unproven) inventory and the most aged inventory. There is a direct link between a high level of aged inventory and a decline in sales. This report shows which categories you need to pay attention to.

Applying the 80:20 principle to these reports is the most effective way to get the best value from them. You will discover 20 percent of the categories, vendors and inventories are providing you with 80 percent of your sales, and this is where you need to concentrate your time and energy.

You can’t manage what you don’t measure. Use the valuable information that your store system can provide you with and reap the benefits.

David Brown is president of the Edge Retail Academy. To learn how to complete a break-even analysis, contact inquiries@edgeretailacademy.com or (877) 569-8657.